The merits of minding your home business

Have you ever wondered, “how can I start a business from home?” Is it profitable? Is it long-term sustainable? There’s tons of information out there to help you start your home business, but one topic that is often lacking in the search results is how to insure a home business. 

If you’re faced with the task of beginning your own home business, then it can help to have a handy guide to help you through the most critical aspect of being your own employer: having the right insurance to ensure your business can thrive.  

Before you jump on the ‘ol home business train, you may want to hold your (work) horses a minute. If you own a home, you probably have home insurance. You may not be aware that your home insurance, while it will cover you for the majority of perils that could affect your home, is extremely limited when it comes to protecting business items. This includes inventory from your business (materials, supplies, etc.) and any liability arising from the ownership or activities of your business. 

So, if you make a claim because a child attending your home-based daycare clogged your toilets and caused them to overflow into your home, damaging all your daycare supplies and furniture, it might come as a surprise to know this wouldn’t ordinarily be covered. 

Not to worry, though. Insurance does exist for home-based businesses, but you’ll need to add it after the fact, either in the form of an endorsement (supplementation to an existing policy) or a separate commercial policy. Here are some examples and three approaches within which most home-based businesses will fit. 

If you’ve noticed ample use of the qualifiers, may or likely, it’s intentional recognition of less than uniform wordings and underwriting rules in the marketplace. The good news is your Mitch broker has both the technical expertise and product understanding to provide definitive solutions that meet your specific needs. Give us a call! 

In Canada, there are almost 3 million active businesses without paid employees. A lot of these businesses, if not all, are run out of home. Not all are successful, and not all those that survive their first year will continue to survive until their second. It takes a good foundation, and beyond that, it takes a good insurance policy that covers all the corners it needs to. 

It is vital to ensure adequate coverage is in place, or arranged, to cover your home business. Personal Property insurance—also known as Habitational or Residential insurance—is principally intended to cover the personal property and activities usual to a private dwelling. Your policy may extend coverage for incidental business property and activities, but standard homeowner’s and tenant’s policy wordings invariably have strict limitations when it comes to revenue generating business or commercial endeavors. 

Insurance underwriting is the art of evaluating risk and arranging coverage, terms and pricing to fairly and effectively reflect that risk. A coverage solution for a given home business considers, among other things, the unique hazards of the business operation and the revenue it expects to generate. 

Underwriting rules and policy language vary substantially between insurance companies and your best bet is to discuss any home business consideration or activity with your insurance broker. Solutions, in one form or another, are readily available for virtually all home-based businesses. 

Determining whether a home business is: automatically included; available as a personal property extension; or destined for a separate commercial policy, is largely tied to the potential for losses and claims arising out of the specific business operation. The broker or underwriter applies established rules or judgments relative to the loss exposure to owned property, and the potential for property damage or bodily injury to other parties resulting from legal liabilities associated with the operation of the business, work completed, services provided or products sold. 

In short? It varies. Deciding for yourself what to get can be like shooting yourself in the foot; you could get too much coverage and end up paying too much for protection you don’t need, or you could get too little and end up overly exposed. Asking a broker for their advice is your best course of action.  

Insurance aside, running a business from home is multi-faceted and takes a lot of work. Insurance is one thing, yes, but having a good idea, a set plan, investment, skill, and dedication are all determining factors in whether your business will succeed. Having insurance is a good back-up plan, but we recommend looking into the different guides and resources there are to starting a new business to help you along in your journey. 

When you’re ready, give us a call at Mitch Insurance. We can recommend the type of insurance you might need to support your business.